The Empty Whitecoat

Free Prize Inside: Edgecraft

Seth Godin's new book, Free Prize Inside, champions the role of "soft innovations" in creating the next "Purple Cow" (!) and making the organisation "remarkable"... I'm all for the latter but from what blurb I have seen about Seth's new tome, his new cow appears to be firmly stuck in the muddy field of incremental product innovation:

Soft innovations can make your product into a Purple Cow, they can make it remarkable. They do this by solving a problem that is peripheral to what your product is ostensibly about. It's a second reason to buy the thing, and perhaps the first reason to talk about it. It may seem like a gimmick but soon what seems like a gimmick becomes an essential element in your product or service.

It’s a mistake to try to champion much beyond your reach. Picking a Free Prize that you can actually execute is much smarter than picking the ‘best’ Free Prize.

Finding the Free Prize doesn’t involve brainstorming. Instead, use Edgecraft. Edgecraft is an iterative process that is much easier for an organization to embrace than brainstorming. There are hundreds of available edges, things you can add to, subtract from or do to your product or service. Find an edge and go all the way to it. Going partway is time-consuming and expensive—and it doesn’t work very well. Going all the way to the edge is the only way to jolt the user into noticing what you’ve done. If they notice you, they’re one step closer to talking about you.

I must admit I do not get where Seth is coming from. He may be the "best intuitive marketer alive today" (according to somebody called Randall Rothenberg) but for me, Free Prize Inside appears to be advocating a return to a simplistic form of product-based marketing and value-creation - a form of differentiation that can be quickly copied and commodified and which can only lead to a further escalation of product variety-based competition. As the above passage signals, Edgecraft would appear to focus internally on the firm's value chain where decisions on what to make, what to buy from suppliers, what features to add, where to build them and so on - all begin and end with the firm. The value-creation process is separate from the market - the customer is passive and remote, the market is a crude form of exchange and marketing is reduced to a role of gimmickry and promotion.

Incidentally, the idea of Free Prize Inside is not new. Ulster University Prof Stephen Brown ("The finest writer in our field today" – Journal of Marketing) published a similarly titled book last year Free Gift Inside. In it, he amusingly argues for a return to marketing tease and trickery.

Marketing is not about customer-orientation. It is about selling stuff. It is about selling stuff to today's sated. sophisticated, super-skeptikal consumers, who have an infinite number of near-identical offerings to choose from.

Maybe Seth's Free Prize Inside is an "Edgecraft" version of Free Gift Inside.....

MIT on Elderly Wellness

There is an excellent MIT Technology Review article on the future of "Elderly Wellness" IT (see my previous blog), available online here (registration required).

The author, Rodney Brooks writes,

Many in their 40s and 50s have spent the last twenty years adopting information technology wholesale, which means they will probably continue to adopt new technologies as they grow older. People will be nostalgic for the information content of their youth, and many will want to learn new things. There’s a surging tide of content out there to satisfy them; in addition to decades of TV shows—and the growing archive of cable TV documentaries—universities are globalizing their reach by offering courses and materials through the Internet. What’s needed are ways to index and search for video, audio, and images that are as simple as the search engines that help us find and understand text documents today. The aging population will provide a big customer base.

This leads us to the more general question of how the economics will work out with so many retirees and so few taxpayers. Technology will continue to be called upon to increase productivity in any way that it can, and to provide part-time work possibilities for the elderly. For instance, elderly people might act as remote quality-control inspectors or security monitors, or even provide high-level remote commands to maintenance or construction robots.

Technology will certainly help alleviate social isolation. People’s demand to continue socializing as they grow less able to travel and visit directly will create new markets for tele-visiting, tele-socializing, and tele-role-playing. Graphics, computer vision, and speech understanding are all components of providing friendly and comfortable immersive experiences.

The bottom line is that as we get older, we are unlikely to return to the “simpler” life of our childhoods, when technology was less pervasive than it is today. Rather, the pressures of demographics and our own predilections are going to lead us to continue to adopt new technologies and new ways of interacting with our machines, and we’ll probably be much happier for it.

The customer interaction is king

Customer Knowledge Management or CKM is an innovative and important strategic process by which progressive companies are now able to emancipate their customers from being passive recipients of products and services to becoming empowered knowledge partners in the organisational value-creation and -sharing process itself. Indeed, in this age of knowledge-based competition, it is incumbent upon firms to pay increasing attention to the development of customer knowledge.

The concept of pursuing the direct involvement of customers to boost a firm’s knowledge assets, mainly for the purpose of product innovation, is not new. Yet the novel perspective at the heart of advanced CKM is the fundamental shift in emphasis from "the firm as knowledge creator" that learns about customers and creates value for them, to a perspective of "the firm as a co-creator of knowledge" that learns and creates value with its customers.

In an excellent article in 2003, University of St. Gallen academics Gibbert, Leibold and Probst distinguish CKM from the more dominant knowledge management (KM) and customer relationship management (CRM) perspectives across several dimensions. These include managerial mindset, knowledge-creating rationale, the alternative purpose of customer communications and an extended view of the role of the customer in the innovation and organisational learning process. But perhaps the most significant defining variable of CKM proposed by the three authors is the type of customer knowledge sought by CKM firms. Specifically, customer knowledge managers seek to acquire knowledge from the customer as well as knowledge about the customer (the latter being the more typical domain of customer relationship management [CRM]). Although it incorporates principles of KM and CRM, CKM they write, “moves decisively beyond both to a higher level of mutual value creation and performance. More specifically, the notion of CKM contributes to the KM literature by providing an expanded view of organisational epistemology; i.e. one that includes the customer as a knowledgeable agent in the knowledge creation process.

A shift in mindset towards looking at the customer as a knowledgeable entity has important implications. Significantly, firms developing a CKM capability are more likely to have an external perspective and outlook on knowledge creation and renewal and to exhibit higher levels of market experimentation or “probe and learn” behaviour and outcomes.

To achieve an advanced CKM competency, customer knowledge managers must seek opportunities for partnering with customers as equal co-creators of organisational value. Their focus is on how to generate growth for the organisation through acquiring new customers and through engaging in active and value-creating dialogue with them. In other words, CKM suggests that customers are more knowledgeable than businesses normally assume and consequently firms must mobilise customer knowledge using a variety of collaborative and dialogical means from a diversity of customers in order to co-create valuable personalised experiences, products and services.

Unfortunately, many businesses today view such potentially knowledge-rich customer interactions as a COST TO BE REDUCED rather than as a potential investment in dialogue and learning. By automating customer interactions or outsourcing them overseas for example, many companies are at risk of commoditising one of their most precious future innovation assets: the opportunity to learn from and create value with their customers. In most cases such cost-focused initiatives will fail to deliver lasting value. Why? Because organisations use them as quick-fixes instead of addressing their more deep-seated underlying problems - i.e. a lack of customer knowledge and a limited market orientation...

The problem is that many companies have become so internally focused they have gotten carried away with supply-side issues and have taken their eye off the customer and their needs. Until such organisations make a serious effort to understand their markets and their customers better, initiatives designed to take cost out of the customer interface will amount to expensive, time-consuming mistakes. Many financial services businesses in the UK for example are spending too much of their valuable resources on internal operational efficiency (i.e. doing things right at lower cost) at the expense of external customer effectiveness (i.e. doing the right things).

I was talking to one such organisation only the other day. Having already outsourced their customer management function, they were now concerned that each customer inbound call was costing them a "grossly expensive" 41 pence per contact. Their response? Shift them onto the web of course.... !

The marketing dilemma and customer knowledge creativity

"Old" Marketing aimed to create and communicate additional value that lay outside of consumer perception (e.g. Sony Walkman and other product innovations). For the last 50 years or so, marketers have been continually seeking to improve that core value through the principles of “New and Improved”.

But today, nearly all of the incremental value marketing can create (from a life-enhancing point of view) has already been identified and implemented. Now, we are reaching a point of "market(ing) saturation" where the commercial opportunities to “New” and “Improve” are fast-becoming increasingly limited.

Equally, the all-aboard-the-relationship marketing and CRM ship is slowly sinking. And many companies must be wondering why their avid "customer-orientation" philosophy, despite its best intentions, is failing.

Maybe it’s the "hit and run" nature of most marketing that causes the problem. Maybe it’s because all those “Buy Mine, Buy Mine” messages add up to a kind of “white noise” from the consumer’s point of view, despite the relationship overtures... . Maybe it's simply because most marketers think and practice in largely the same way. They share a consensus of “how to market”. In effect, they suffer from a "Problem of Similarity”

Well, whether this is true of all marketing organisations or not, whenever there exists such a dominant consensus, the time is right for a fundamental breakthrough in thinking and practice.

I thought this statement by Prahalad and Ramaswamy in a recent-ish piece in Information Week summed up this "marketing dilemma" very nicely:

Extending current thinking about customer relationships isn't just about better data gathering, segmentation of consumers, or one-to-one marketing. It's about facilitating dialogue and consumer engagement among dynamic consumer communities and heterogeneous individuals--all eager, and some able, to co-create their own experiences. Consumers are finding it easier to form their own self-selecting virtual and real communities. Access to information is no longer asymmetric but increasingly symmetric. Consumers are no longer constrained by space and time, and have more choices than before. Consider that more than 70% of auto sales last year were made to consumers who researched their purchases on the Internet. As dialogue revolves around symmetric information, consumers can shop over the Internet for prices and features, eschewing what's available "on the shelf at list prices." Companies that meet consumers' price-performance expectations will be those that consummate the exchange...

We believe that a dramatic but silent revolution is under way. The emergence of a consumer-centric economy will force a consumer-to-business-to-business view of the world and an associated experience-fulfillment network. Traditional company/product-centric views of the consumer will be inadequate to the task. IT must provide itself with a broader view of the information infrastructure and recognize that efficiency in transactions must coexist with innovation in applications and flexibility in relationships with heterogeneous consumers. A capacity for dialogue across the fulfillment web will become the hallmark of the best of breed. More important, managers will be forced to explicitly recognize and facilitate the formation and evolution of thematic consumer communities. The process of value creation and retention of consumers will be a function of the quality of the experience creation and fulfillment process. This is the challenge of the new economy--the consumer-centric economy.

It is possible to connect P&R's thoughts on consumer-centric renewal and new forms of dialogue with those of Sawhney and Prandelli (2000 in In Y. Malhotra (Ed.), Knowledge Management and Virtual Organisations) on the changing role of the customer as a collaborative partner ... although the latter's emphasis is much more on customer knowledge exchange and creativity than the swapping of, or access, to "hard" information on products and services in "symmetric information markets"...

The perspective of customers as active participants and co-creators in the firm knowledge creation process and in defining the firms offerings is “consistent with relationship marketing but goes beyond its traditional conceptualisations. Relationships with customers have traditionally been viewed as one-way: firms import knowledge about customers within their boundaries. In the networked world, firms can establish two-way relationships, defining new mechanisms for direct co-operation in knowledge creation”. (p.259)

Sawhney and Prandelli define four signficant implications of these new consumer-diven forces:

They require businesses to question fundamental assumptions about customer knowledge management.

It no longer means just populating databases with loyalty card data or customer profiles

It demands new means to facilitate the participation of customers in the firms knowledge-generating processes

It demands new marketing and knowledge management competencies

So it seems that those businesses that have high levels of "customer permeability", open network access and a willingness and mindset to involve and learn from their customers will be in the best position to address the marketing dilemma. This "reverse marketing" approach effectively turns marketing inside-out by evolving it into an advanced customer knowledge co-creating business-wide competency.